Devaluing the Concurrency

Thomas Donnelly

October 27, 2011 10:10 AM

“Concurrency” in defense programs – that is, overlapping development and production of weapons systems – has long been a controversial Pentagon practice. Not surprisingly, inventing something while beginning to build it, particularly something as complex as a modern warship, aircraft, or combat vehicle, introduces the risks of schedule delays and cost overruns. At the same time, the rapid fielding of a still-to-be-perfected system can create or preserve an advantage on the battlefield; it’s the technological equivalent of getting there “the fastest with the mostest.”

Now the Obama Pentagon is threatening to rewrite the procurement rules in a way that would make it extremely difficult to have the option of concurrent development and production.

While there’s no way to eliminate the risks, the Defense Department has often felt that the rewards of concurrency outweighed the risks. Back in the 1980s, a Congressional Budget Office study of the issue judged that, of the 31 major systems it surveyed, 13 qualified as “highly concurrent.” The CBO also found that “concurrent development and production of weapons systems has been emphasized during wartime or periods of national emergency, when a consensus readily supported the acceleration of high-priority weapons systems.” Historical examples included depth charges and nuclear weapons in World War II, the Sputnik-era missile programs of the 1950s, and the introduction of “smart” weapons from the 1960s through the 1980s.

There has been a wide range in Pentagon procurement policies over time; they seem to change with the decades. It was under Robert McNamara in the 1960s that the Pentagon went for concurrency in a big way, but the troubles of the C-5 cargo plane program and other rapidly developed and fielded systems swung the pendulum back to a more cautious approach. In the early 1970s, the Pentagon adopted a “fly-before-buy” approach along with a more rigorous effort of operational testing. The fashion changed again when, in the late 1970s, the Defense Science Board noted that development and production of weapons systems was taking longer than ever, and the defense build-up of the Reagan years again embraced systematic concurrency.

Hemlines have risen and fallen several times since, and Congress – which loves to sensationalize procurement scandals – has increasingly imposed testing and other hurdles to concurrent development and production. Yet, when the national or military need is great, everyone turns a blind eye and the normal bureaucratic order is set aside. Nothing reflects this basic common sense more than the rapid purchase of $25 billion in Mine Resistant Ambush Protected vehicles for use in Iraq and Afghanistan. “Time is of the essence,” then-Defense Secretary Robert Gates told Congress. “Every month troops go without MRAPs could indeed cost lives.”

In sum, whatever the problems of unpredictability in cost and schedule that inevitably come with concurrent development and production, the Pentagon has always wanted to have the option open. But concurrency is only possible if the Defense Department is willing fairly to share the costs and risks.

This long-time bargain is now under threat from Deputy Defense Secretary Ashton Carter and the acquisition officials of the Obama administration. They’re seeking to change the terms of the next production contract for the F-35 Lightning Joint Strike Fighter. Instead of splitting the costs and risks with prime F-35 contractor Lockheed Martin, Carter now wants to move the so-called “share line” substantially in Lockheed’s direction, perhaps to the point where the company runs all the financial risks.

The administration, still hunting $489 billion in overall defense cuts simply to meet targets in the recent Budget Control Act, has already hinted at F-35 program reductions. It’s also happy to dump the blame on Lockheed for the JSF’s troubled development, counting on conservatives in Congress – led by Senator John McCain, who has advanced essentially the same idea in legislation – to regard the proposed contract changes as “procurement reform” targeting “Pentagon waste, fraud and abuse.” Shay Assad, the Pentagon’s “director of defense pricing,” represents an administration spoiling for a fight. “We’re going to be breaking some glass here.”

But defense industry analyst Loren Thompson more accurately explained the immediate effect to Reuters: “If the government succeeds in shifting the ultimate risk…then it could easily wipe out any profit on the program and leave the company unprotected against future liability.” Only in the Defense Department can you ask a someone to invent an airplane unlike any previous airplane, change your mind repeatedly about what sort of airplane you’d like, change your mind repeatedly about what it “should cost,” and then hold the inventor liable for all the changes and expenses. Now that’s procurement reform!

While it’s politically expedient to beat up on defense contractors – the “military-industrial complex” commands very few votes these days – it makes for very bad policy. Even when weapons programs aren’t “highly concurrent,” they rest upon trust that goes beyond the letter of the contract. And as Lockheed, which is pushing back against the proposed shift in cost-sharing, well knows, its ability to attract public capital will be crippled if it’s forced to eat the costs of both its mistakes and the Defense Department’s. Punishing Lockheed in this way will send a chill throughout the industry. The ultimate result would be to weaken the entire system that has ensured the predominance of Americans on future battlefields. The defense industry is hardly a case of pure capitalism, but it has proved to be far better than any state-run arsenals, particularly when it comes to innovation.

And for dumping all the development costs onto contractors will only exacerbate the government’s worst habits. The majority of cost growth and schedule problems in acquisition programs stem from decisions made by the government – changes in requirements, unstable funding patterns and the like. This “reform” would allow the Pentagon to play exclusively with house money, and incentivize it to play longer odds.